Faced with criticism, Stiglitz now says that he exaggerated when speaking of “Argentine miracle” and that he did not mention inflation “due to lack of space”

Stiglitz and Cristina Kirchner, with whom he co-chaired the New School University’s “Argentina Observatory,” the launch of which was financed by the Argentine government

In the face of criticism from academic and professional economists of the article in which he spoke of the “Argentine miracle” of Covid and warmly praised the economic policy of the government of Alberto Fernandez and the minister Martin Guzman, his disciple at the University of Colombia, Joseph Stiglitiz He said that using the word “miracle” may have generated controversy and negative reactions from his colleagues.

Stiglitz, the 2001 Nobel laureate in Economics, consulted by telephone with the Bloomberg agency, recalled that he contributed to coining the “miracle of Southeast Asia” in the 1990s and that he was also criticized then. “If you use that word, you are inviting criticism,” he acknowledged, but insisted on criticizing one of his critics, Federico Sturzenegger –who had expressed his astonishment at Stiglitz’s article – at his role as president of the Central Bank in the initial stage of the government of Mauricio Macri.

In addition, Stiglitz said that in his long article he did not make any reference to the problems of inflation in Argentina because he had limited space to express himself and wanted to focus on the real economy.

Stiglitz’s praise for Kirchner’s efforts dates back to 2003, when the then government of Nestor Kirchner financed the launch of Argentina Observatory from New School Univeristy from New York. Participated in the act Cristina Fernandez de Kirchner (CFK), Stiglitz himself, the economist Martín Abeles (husband of the former Deputy Chief of Staff and current Secretary of International Economic Negotiations of the Foreign Ministry, Cecilia Todesca) and the current Minister of Productive Development, Matias Kulfas.

from the lectern

Later, Stiglitz shared the lectern on several occasions with the then senator and later president, who liked to rely on the concepts of the Nobel Prize in Economics to justify her positions. On one occasion, in August 2012 at the Casa Rosada, Cristina recalled that Stiglitz, who had preceded her in speaking, had explained the case of manipulation of Libor, an interest rate in the London market, and concluded “if we are going to trout, let’s all trout”, in what was perhaps the most express recognition of the falsification of INDEC statistics, which began in January 2007, in the last year of the government of Nestor Kirchner.

“If we are going to trout, let’s all trout,” then President Cristina Fernández de Kirchner said in 2012, after quoting Stiglitz, who had preceded her in speaking and explained the case of manipulation of Libor, a rate of interest in the London market

Stiglitz’s recent article was refuted on Project Syndicate, the opinion piece portal on which it was originally published, by economists such as William Buiter y Anne Sibert, professors from Columbia University and the University of London, respectively, and the former Minister of Economy of Chile, Andres Velasco, Harvard professor, and Argentine economist Eduardo Levy Yeyati, dean of the School of Government at the Universidad di Tella and visiting professor at Harvard. Buiter and Sibert’s article is entitled “The problem with Argentina.” and that of Velasco and Levy Yeyati, “The imaginary miracle of Argentina”.

Stiglitz and Guzmán, when he underpinned the academic and political rise of the current Argentine Minister of Economy
Stiglitz and Guzmán, when he underpinned the academic and political rise of the current Argentine Minister of Economy

Both severely criticize Stiglitz’s article. According to Buiter and Sibert, rather than having staged a “miracle”, Argentina “is on the way to another economic disaster”. Both economists review the recession and rebound of the Argentine GDP in 2020 and 2021 and note that although the recession due to the pandemic “attenuated inflation in the second half of 2020, the recovery brought the annual rate back to 50.9% by the end of 2021, despite periodic price freezes and government-imposed export caps on certain meat products and grains. An inflation rate of 50% is neither economically, nor socially, nor politically sustainable. But reducing it requires fiscal austerity, which means going through a period of below-potential growth and higher unemployment.”

not credible

The economic and social cost of reducing inflation is usually lower when the authorities are credible, they say, “this is not the case in Argentina.” In addition, they point out that the negative real interest rate (lower than inflation) and the delay in the official exchange rate during 2021, two pillars of the economic policy of Fernández and Guzmán, will make it very difficult to stabilize the economy. On the other hand, they add, “rigid capital and exchange rate controls to prevent foreign exchange reserve losses have had only limited success,” pointing to the central bank’s low net international reserves of $3.2 billion. Liquid reserves are even lower, they limit, the exchange rate gap is greater than 100 percent.

“We agree with Stiglitz that the IMF’s negotiations with Argentina since 2018 have been deeply flawed,” say Buiter and Sibert, and consider it “incomprehensible” that the IMF has made so much money available to the country, but they define the current negotiation as a ” facade” behind which “another sovereign default looms as of 2024″.

According to Buiter and Sibert, capital and exchange rate controls to prevent the loss of reserves did not prevent the Central Bank’s net international reserves from being only USD 3.2 billion today, liquid reserves from being even lower and the exchange rate gap from being greater than 100 percent.

In addition, they recall the high labor informality in Argentina and that the country ranks 78th out of 189 in Transparency International’s most recent Corruption Perceptions Index, 83 out of 141 in the World Economic Forum’s Global Competitiveness Index, and 126 out of 190 in the World Bank’s latest Doing Business ranking . “Argentina’s political and economic institutions will need fundamental reform if the country is to achieve fiscal sustainability, low inflation, and equitably distributed economic growth at a rate guaranteed by its rich natural and human capital resources. We are still waiting for that miracle,” concluded Buiter and Sibert.

imaginary miracle

Velasco and Levy Yeyati, in their response to the “imaginary miracle,” say that Stiglitz’s “statistical trick” is to call the rebound from a massive drop in output “growth.” That rebound, they say, is no surprise and doesn’t seem healthy or sustainable.

The recovery, they say, was mounted in low-return construction projects, driven in part by the need to hedge against rising inflation, and in sectors such as automobiles, clothing and electronics, protected from foreign competition not only by barriers to imports, but also because of a huge exchange rate gap, in which importers buy their inputs at the official exchange rate and sell the final product at the market rate, a subsidy, they say, that “sooner or later” is going to end. In addition, they remember, although investment rebounded in 2021, it is still 17% below the 2018 level.

In the long term, the text continues, growth is further compromised by the loss of “human capital”, something they measure in the closure of schools for 79 weeks, almost double the 40 weeks that schools were closed in Uruguay. “The learning loss will likely be seen when the December standardized test results are made public.”

Chilean economist Andrés Velasco, professor at Harvard and Minister of Economy of his country during the first presidency of Michelle Bachelet
Chilean economist Andrés Velasco, professor at Harvard and Minister of Economy of his country during the first presidency of Michelle Bachelet

Velasco and Levy Yeyati contrast this educational attack with the concept of “learning society” that Stiglitz advocated in one of his books, and add that in addition to closing schools, the government of Alberto Fernández also damaged the nascent technology sector, in which companies they are going to other countries and the sector’s exports stagnated at a level 20% lower than the level they had reached in 2017.

The Stiglitz narrative, the authors continue, describes “miraculous improvements” in public finances, but ignores that in 2021 public revenues remained at the level of 2019 and that the only improvements were an increase in withholding tax collections, due to the increase in the price of commodities, the application of the wealth tax, which will not be repeated, and the sending of funds from the IMF, “which the government accounts for as primary income”, and will not be repeated either.

A structural problem, made worse

The shortage of foreign exchange, a structural problem for Argentina, “is getting worse” as a result of the depletion of international reserves, the authors affirm. And if the 2020 debt swap was intended to restore confidence in the country, they add, it failed resoundingly: Argentina’s country risk is the second highest in Latin America, behind Venezuela.

As for social indicators, they limit, “they are anything but miraculous.” In this regard, they mention that According to ECLAC, Argentina experienced the largest increase in poverty in Latin America during the pandemic. “Today – they recapitulate – 40% of the population lives below the poverty line, only one in five workers has a formal job and the proportion of wages in GDP fell four percentage points in the last two years”.

Stiglitz and Guzmán, already minister REUTERS/Remo Casilli/File Photo
Stiglitz and Guzmán, already minister REUTERS/Remo Casilli/File Photo

Macri made many mistakes, say Velasco and Levy Yeyati, but none justifies or explains those of Alberto Fernández and his team, nor does it serve to explain the current Argentine situation “as a Manichaean battle between left and right.”

“Political and financially ambitious academics”

As the icing on the cake, the authors quote the economic historian Carlos Diaz Alexander, who in 1982 sharply criticized the “politically and financially ambitious academics” who in their Northern universities behave like cautious scientists but “in their summer excursions to the periphery loosen their libido and let ideology prevail over analysis.”

Díaz Alejandro, recall Velasco and Levy Yeyati, criticized the orthodox Milton Friedman and his disciples, but the same could be said today of the “heterodox preachers of the North.” In their cloisters, they conclude, these academics do not subject their students to bad statistics and intellectual blows. “Why should they treat Argentine citizens differently?”


Faced with criticism, Stiglitz now says that he exaggerated when he spoke of the “Argentine miracle” and that he did not mention inflation “due to lack of space”


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